National Express London bid off rails

Richard Bowker's National Express was dealt another blow to its trains business today after it lost out in the bidding to run Mayor Ken Livingstone's new London Overground network.

The news came as a bidding free-forall was set to break out for the hugely profitable East Coast Main Line services out of King's Cross, whichGNER today lost. A new train franchise - the London Overground network - is set to come into force next November when Transport for London takes control of and merges the existing North, West and East London Railways.

Most of that network is currently operated by Silverlink Metro, a division of National Express. Itwas on the original shortlist to operate the London Overground, but TfL today ditched it in favour of a contest between Go-Ahead, which runs Southern Railways and the South-Eastern commuter routes, and MTR Laing, a joint venture between theHong Kong Mass Transit Railway and Laing, operator of Chiltern Railways.

National Express has now been bumped off four rail franchises in the past two years and lost its crown as Britain's biggest train company to FirstGroup. Merrill Lynch research suggests that if National Express does not win either of the other two franchises it is bidding for - Virgin's CrossCountry and a redrawn East Midlands network - profits from trains could dive from a high of £64m in 2005 to as little as £14m in 2008.

Bowker has committed to rejuvenating the group's rail business, which has shrunk to its services out of Liverpool-Street and Fenchurch Street and the Gatwick Express.

National Express, FirstGroup, Stagecoach and its joint venture partner Virgin, Go-Ahead and Arriva are likely to seek a new King's Cross franchise to be awarded in 2008.

GNER is to lose the franchise after the failure of parent Sea Containers.